As 2011 comes to a close, we will say goodbye to something called the Volumetric Ethanol Excise Tax Credit, or VEETC for short. Most people have probably never heard of VEETC, but they have certainly felt its effects when they fill up at the gas station. The 45 cent per gallon federal tax credit will end Dec. 31. Since 2004, the discount – which has been reduced over the years – was given to the company that first blends pure ethanol with gasoline. It's not a credit that goes to corn farmers, or ethanol producers. Only companies who first blend the fuels got the credit. For the most part that meant oil companies and distributors were the beneficiaries. Don't forget the consumer; they were given a break at the pump in the form of lower gas prices.
In an effort to save money, Congress has decided to let this tax credit expire. The tax credit was a vital part of the expansion of the ethanol industry. It was needed to get the industry off the ground by making ethanol more affordable at the pump. But now, as ethanol production technologies and efficiencies improve, and more consumers learn of the benefits of using clean-burning, homegrown fuels, the tax credit isn't as vital as it once was. What the ethanol industry needs now is investment in improved infrastructure to get ethanol closer to being equal in the marketplace with regular gasoline.
For decades, big oil companies have enjoyed billions of dollars in government subsidies while raking in massive profits. Ethanol needed a way to compete. This tax credit was a way to keep the playing field level – or at least close. Now, the industry needs to expand its infrastructure in the form of ethanol blender pumps that dispense higher blends of the fuel that's grown right here at home. There must be more flex-fuel vehicles on the roads that can burn the higher blends, and ethanol dedicated pipelines are needed to get homegrown fuel to larger markets.
For years, South Dakota Farmers Union has pushed for increases in the number of ethanol blender pumps at retail gas stations. In 2010, the South Dakota Legislature passed a bill, which Farmers Union supported, to allocate $1 million in stimulus funds to give out in the form of $10,000 grants to retailers for each ethanol blender pump they install at their stations. Dozens of stations across the state took advantage of the grants and installed new pumps. Just recently, a legislative panel approved rules which will continue to provide grants to retail stations to install even more blender pumps in the state. The new rules will also eventually give incentives to get more flex-fuel vehicles on the roads.
The U.S. Department of Agriculture has made a commitment to get 10,000 new blender pumps online across the country in the next five years. These programs will give consumers more choice at the pump, and I'm confident that more people will choose fuel that is grown and produced right here in our state, rather than buying fuel that is produced in a foreign country. But we can't simply rest on our success. More must be done to educate consumers and build the infrastructure needed to continue to make the ethanol industry successful.
The ethanol industry provides a market for the corn our farmers raise. Ethanol has created hundreds of jobs in South Dakota. Ethanol provides consumers with a better choice. Ethanol is a cleaner-burning fuel which is better for our environment. I hope our elected leaders realize that even though they're allowing the VEETC to expire, the future success of the ethanol industry, the agriculture industry, and South Dakota's economy depends on solid policies that create a market that is fair. Continued investment in ethanol infrastructure is the next step.
Doug Sombke is a fourth-generation family farmer who owns and operates a farm near Conde, and is the president of the South Dakota Farmers Union, a 97-year-old family farm advocacy organization.